Startup Runway: What It Means and How to Calculate It

net burn       = monthly costs − monthly revenue
runway (months) = cash on hand / net burn

Net burn is the cash actually leaving the bank each month. If the business earns $40,000 and spends $69,000, net burn is $29,000 — not $69,000.

Gross burn is total spend; net burn subtracts revenue. Runway is about cash, so net burn is the right denominator for any business that has revenue at all. Using gross burn:

• understates runway for every business that is earning, sometimes by years;
• makes revenue growth invisible — a business doubling revenue would show the same runway;
• turns a profitable company into an apparent six-month emergency.

There is one legitimate use for gross burn: understanding the total cost base if revenue stopped entirely. That is a stress test, not a runway calculation.

cash on hand    = $450,000
monthly costs   = $69,000
monthly revenue = $40,000
net burn        = $29,000
runway          = 450,000 / 29,000 ≈ 15.5 months

If revenue grows 4% a month while costs stay fixed, actual runway is longer than 15.5 months, because the burn shrinks each month. The simple division is a conservative estimate; that is acceptable for planning as long as you know which direction the error points.

If revenue covers costs, net burn is zero or negative and the runway formula divides by zero. The correct statement is not a large number of months — it is that there is no runway limit. A profitable business is default alive; the constraint becomes how aggressively to invest, not how long until the money runs out.

Reporting “18 months of runway” for a profitable business is a fabricated deadline that will end up in a board deck and then in decisions.

The reason for eighteen months rather than twelve is fundraising time: a round commonly takes three to six months to close, so starting with nine months left means raising from a position where you can still walk away.

A long runway with slow payback is still a cash problem: every additional customer consumes working capital before repaying it. Read runway with the CAC payback period, and with the MRR trend — a flat MRR line with fixed costs means the runway estimate is optimistic, not conservative.

• Using gross burn. Understates runway for any business with revenue.
• Ignoring revenue growth. Fixed-burn division understates runway when revenue is rising.
• Reporting a finite runway when profitable. Net burn at or below zero means no countdown.
• Forgetting one-off costs. Annual insurance, tax payments and hardware purchases are cash out even if they are not in the monthly run-rate.
• Planning to raise at three months. By then the terms are set by whoever is willing to fund you.

The runway calculator shows the zero-cash date and a cash curve, and handles the profitable case explicitly instead of returning a division-by-zero artefact.